Travis Perkins has released its full year results for year 2024, which show a 99% collapse of its operating profits.

The accounts for 2024, the release of which had been delayed by almost a week "as a result of the group's auditor requesting additional time to complete its standard audit procedures", register "a challenging year for the Group" with revenue down 4.7% year-on-year to £4,607 million (from £4,837 million). However operating profit was down 98.75% to £2 million from £161 million in 2023. This includes £139 million in asset impairments.

Adjusted operating profit excluding property profits of £141 million was £42 million (23%) lower than during the previous year (£183 million). Around £39 million of the profit decline resulted from lower sales volumes while approximately £56 million was attributable to lower gross margins, driven by price deflation and increased competitive intensity.

This was driven by the Merchanting segment through a combination of price deflation, reduced demand across the UK construction market, and increased competitive intensity.

Against this backdrop management took actions to reduce total overheads by £53 million compared to the previous year. Restructuring actions taken at the end of 2023 reduced overheads by £35 million with a further £36 million of savings on discretionary spend, and £9 million savings from the strategic review actions taken in Toolstation Benelux. Offset against this was around £27 million of overhead inflation, primarily on payroll and property costs.

Merchanting

The Group’s Merchanting businesses saw revenue fall by 6.2% in the year as a result of price deflation and declining volumes, arising from the depressed levels of UK construction activity and an intensely competitive backdrop.

Adjusted operating profit reduced by 29.7% to £149 million from 212 million, reflecting the high operational gearing of these businesses. Operating profit declined 89% to £20 million from £199 million due to these factors and adjusting items of £133 million relating to impairments in Staircraft and certain Merchanting branches, and restructuring actions.

Price deflation (of 3.6%), a significant factor in H1 due to the rollover of prior year timber price reductions in particular, eased in H2. However, volumes worsened as the year progressed, in part driven by project postponements caused by general election uncertainty and the delayed government budget.

The private domestic RMI market, the Merchanting segment's largest end market, which is primarily serviced by the Group’s General Merchant business, remained depressed throughout the year. The private domestic new-build market, primarily serviced by Keyline and CCF working with national and regional housebuilders, also saw another notable drop in activity.

The Merchanting segment’s other end markets – commercial, industrial and public sector – saw mixed levels of demand with uncertainty surrounding government departmental budgets persisting until after the late October budget announcement. This created hesitancy to invest and impacted demand in the second half of the year, particularly in BSS which serves these markets.

Six new Merchant branches were opened during the year. Five of the sites were new General Merchant branches, serving major conurbations including Leeds, Edinburgh, Derby and Coventry, with a new CCF branch also opened in Norwich.

However 51 Merchant branches were closed during the year with the majority being 42 Benchmarx standalone branches. The Benchmarx decision continues the Group’s strategy of offering an integrated proposition within destination General Merchant branches. The remaining nine branches closed comprised eight General Merchant branches and Keyline Kirby with these sites deemed to be poorly located or requiring significant investment and where trade could be transferred to an alternative nearby branch.

On a more positive note, Toolstation UK continued to make good progress during the year with revenue increasing by 2%, reflecting continued maturity benefits and a modest pricing uplift. A net 17 stores were added to the company's network during the year, with 19 store openings, three relocations and two closures. A similar number of store additions is expected for 2025.

Adjusted operating profit increased by £11 million (47.8%) year-on-year, driven by a combination of sales growth, gross margin benefits from improved purchasing, and product mix and supply chain efficiencies.

Refocusing

The company identifies a drift in focus as the reason for the negative results. It sees its key end markets as having seen a progressive deterioration in demand over the past three years driven by high inflation, rising interest rates and weak consumer confidence.

During this period, the Group says its approach to capital allocation and overhead management has diluted returns, exacerbated profit decline and resulted in leverage increasing beyond the Group’s target range. The business has also seen significant personnel change at all levels of the business, particularly in some key customer-facing roles. Most notably, its CEO had to step down from his role last month.

The report estimates that the group has become too centralised which has increased costs and complexity. Work is now underway to transform the operating model to create a business based around empowered local branches, backed by high-quality support functions providing insight and driving the benefits of national scale. Travis Perkins hopes that this cultural shift will bring the business closer to its customers and enhance service levels.

Outlook

The Group has experienced a mixed start to 2025. Trading conditions have continued to be challenging in its Merchanting businesses with pricing now stabilised but volumes in modest decline. By contrast, Toolstation has started the year more positively and continues to deliver good growth.

The business is encouraged to see a more robust demand backdrop for some elements of the construction market. However, it sees the pace and rate of an overall recovery in construction activity levels remaining uncertain and likely to need further cuts to interest rates and an uplift to consumer confidence levels to stimulate a meaningful increase in demand.

In recognition of this backdrop and the operational turnaround challenges the Group currently faces, the Board expects FY25 adjusted operating profit excluding property profits to be broadly in line with FY24 (also excluding property profits).

The Board remains confident in the inherent strengths of the Group and its market-leading position in the building materials sector. Shareholders were however not so confident, with shares for the company slumping to a 15-year low following publication of the results.

Geoff Drabble, Chair of Tavis Perkins, and acting CEO, commented: “Since joining the Board of Travis Perkins, I have been encouraged by the breadth and depth of our market footprint, the quality and commitment of our people and the strength of our relationships within the construction industry.

"However, it is clear to the management team that there are a number of areas where the business needs to refocus and change the way it operates in order to better serve our customers and effectively support our suppliers.

"Several initial steps have been taken under Pete Redfern’s leadership to begin rebuilding trust and confidence, both internally and externally, with focused leadership roles restored in all our businesses and actions taken to re-engage and motivate our teams.

"These changes will make our businesses more responsive and bring them closer to our customers. Following Pete’s resignation, the priority is to ensure this work continues at pace, while the Nominations Committee of the Board identifies the right long-term successor.

"While uncertainty remains regarding the strength and timing of a recovery in UK construction activity, with more resources re-deployed into customer-facing roles, the Group is now better placed to benefit from returning demand.

"This will be supported by disciplined capital allocation, focused on upgrading and protecting our core competitive advantages, and a clear customer-focused strategy owned by the leaders of the business. I am confident that this approach will provide attractive returns for shareholders over the medium-term."